Correlation Between Chevron Corp and Bushveld Minerals

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Bushveld Minerals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chevron Corp and Bushveld Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chevron Corp and Bushveld Minerals Limited, you can compare the effects of market volatilities on Chevron Corp and Bushveld Minerals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chevron Corp with a short position of Bushveld Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Bushveld Minerals.

Diversification Opportunities for Chevron Corp and Bushveld Minerals

-0.44

Correlation Coefficient

Chevron Corp  Bushveld Minerals

Very good diversification

The 3 months correlation between Chevron and Bushveld is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Bushveld Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bushveld Minerals and Chevron Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chevron Corp are associated (or correlated) with Bushveld Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bushveld Minerals has no effect on the direction of Chevron Corp i.e., Chevron Corp and Bushveld Minerals go up and down completely randomly.

Pair Corralation between Chevron Corp and Bushveld Minerals

Considering the 90-day investment horizon Chevron Corp is expected to generate 98.4 times less return on investment than Bushveld Minerals. But when comparing it to its historical volatility, Chevron Corp is 38.54 times less risky than Bushveld Minerals. It trades about 0.04 of its potential returns per unit of risk. Bushveld Minerals Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Bushveld Minerals Limited on January 19, 2024 and sell it today you would lose (0.30) from holding Bushveld Minerals Limited or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Bushveld Minerals Limited

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bushveld Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Bushveld Minerals

The main advantage of trading using opposite Chevron Corp and Bushveld Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Bushveld Minerals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bushveld Minerals will offset losses from the drop in Bushveld Minerals' long position.

The idea behind Chevron Corp and Bushveld Minerals Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.